Its a new year and a new decade so it seems like a good idea to review my AA model and see if I'm still happy with it. Its been more-or-less the same since 2002. (with a few additions and minor changes).
I'll be rebalancing in 6 weeks or so mostly through new purchases, so I have a chance to make adjustments without necessarily having to sell a lot. I'm 41 and intend to ER or ESR within a couple of years, 5 at the outside, probably more like 2-3.
Start with the top down view:
Equities - 50%
Bonds - 30%
Alternative - 15%
Cash - 5%
Of which Equities are split as follows:
US - 60%
Europe - 20%
China - 5%
Japan - 5%
Pacific ex-Japan - 5%
Emerging Mkts - 5%
Bonds - roughly 50/50 TIPS and iBonds. I used to do 50% gov and 50% corporate, but I grew too concerned about future inflation prospects.
Alternative -
1/3 FX and short term foreign treasuries
1/3 Gold
1/3 Real estate
A few notes:
- Re the FX in alternative, I'm moving all of the positions (which were CDs or current accounts) into a ST foreign treasury ETF, this I view as a non-correlated dollar hedge, not as a bond allocation. That shift will be complete in January.
- Re the US equities: that allocation is split 6 ways. 20% each large mkt, sm mkt, lg val, sm val, and 2 'sectoral bets' - energy and health care at 10% each.
- All equities are vanguard funds or ETFs except for China (FXI), Japan (EWJ), Pac ex-Japan (EPP). REIT is Vanguard as well.
- Gold is GLD, Short Term Int'l Treasury ETF is ISHG.
- I have a little play money on the side, that I use for dirty market timing activities.
All comments are welcome. I am sometimes concerned that its too conservative for my age, sometimes I just think its too complicated and I could get the same risk/reward with fewer asset classes.
I'll be rebalancing in 6 weeks or so mostly through new purchases, so I have a chance to make adjustments without necessarily having to sell a lot. I'm 41 and intend to ER or ESR within a couple of years, 5 at the outside, probably more like 2-3.
Start with the top down view:
Equities - 50%
Bonds - 30%
Alternative - 15%
Cash - 5%
Of which Equities are split as follows:
US - 60%
Europe - 20%
China - 5%
Japan - 5%
Pacific ex-Japan - 5%
Emerging Mkts - 5%
Bonds - roughly 50/50 TIPS and iBonds. I used to do 50% gov and 50% corporate, but I grew too concerned about future inflation prospects.
Alternative -
1/3 FX and short term foreign treasuries
1/3 Gold
1/3 Real estate
A few notes:
- Re the FX in alternative, I'm moving all of the positions (which were CDs or current accounts) into a ST foreign treasury ETF, this I view as a non-correlated dollar hedge, not as a bond allocation. That shift will be complete in January.
- Re the US equities: that allocation is split 6 ways. 20% each large mkt, sm mkt, lg val, sm val, and 2 'sectoral bets' - energy and health care at 10% each.
- All equities are vanguard funds or ETFs except for China (FXI), Japan (EWJ), Pac ex-Japan (EPP). REIT is Vanguard as well.
- Gold is GLD, Short Term Int'l Treasury ETF is ISHG.
- I have a little play money on the side, that I use for dirty market timing activities.
All comments are welcome. I am sometimes concerned that its too conservative for my age, sometimes I just think its too complicated and I could get the same risk/reward with fewer asset classes.